Interesting idea, I have setup swap as descriped but I had to change loop device to /dev/block/loop18 which was the only unused loop device on my mobile.
It was wierd, because all new loop devices I created was quickly reserved for the same app by the system, rather annoying. But luckily I had one unused allready available.
I will let you know how it works, how the system performance is percieved after some testing. I would think it could slow down the device, the memeory is increased but it will be on slower memory.